Family finance: Poddar can achieve all goals easily, but needs to secure risks better

Vinay Poddar is a software professional who stays with his homemaker wife, son and father in his own house, in Pune. He brings in Rs 1.75 lakh a month as salary and also gets Rs 5,000 rental income. His portfolio includes real estate worth Rs 1.38 crore (self-occupied house and a house for investment), equity worth Rs 73.1 lakh in the form of mutual funds and stocks, debt worth Rs 84.2 lakh in the form of EPF, debt funds and fixed deposits, gold worth Rs 15 lakh, and Rs 1 lakh in cash. After household expenses, child’s education, insurance premium and investments, he is left with a surplus of Rs 6,850. His goals include building an emergency corpus, buying a car and house, taking a vacation, saving for child’s education and retirement.

Portfolio

Cash flow

Financial Planner Pankaaj Maalde suggests he start by building an emergency corpus of Rs 6.96 lakh, which is equal to six months’ expenses. He can do so by allocating a portion of his cash, fixed deposit and debts funds to the goal. This should be invested in a liquid fund. Next, he wants to buy a car worth Rs 15 lakh in two years and take a vacation worth Rs 8 lakh in seven years. He can achieve both these goals by allocating his insurance maturity proceeds. Poddar also wants to save Rs 65.5 lakh for his child’s higher education in four years. For this, he can allocate a portion of his stocks and debt mutual funds. Poddar wants to buy a house worth Rs 2 crore in four years. To fund this goal in the given period, he will have to sell both the houses and gold. He doesn’t need to make any fresh investment for this goal.

How to invest for goals

Annual return assumed to be 12% for equity, 7% for debt funds. Inflation assumed to be 7%.

Finally, for retirement in 12 years, he will need Rs 5 crore and can allocate his stocks, equity mutual funds and EPF corpus. He should also continue his contribution of Rs 55,000 a month to diversified equity funds via SIPs and Rs 5,000 a month to the NPS to reach the goal.

For life insurance, Poddar has four traditional plans worth Rs 56.7 lakh and a term plan of Rs 1.4 crore, for which he is paying a premium of Rs 4,733 a month. Maalde suggests he continue with these plans and does not need to buy any more life insurance. For health, he has Rs 3.5 lakh insurance from his employer, Rs 2 lakh family floater plan for his family and Rs 2 lakh plan for his father. Maalde suggests he buy a Rs 10 lakh family floater plan, which will cost him Rs 3,917 a month. He should also pick a Rs 50 lakh accident disability plan, which will cost him Rs 667 in monthly premium.

Insurance portfolio

Premiums are indicative and could vary for different insurers.


Financial plan by Pankaaj Maalde Certified Financial Planner


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